Decline in Worldwide Telecom Capex Predicted Amidst Market Stabilization Efforts

The latest report from Dell'Oro Group reveals significant shifts in the telecom sector, highlighting a projected decline in global capital expenditures (capex) at a compound annual growth rate (CAGR) of 2% over the next three years. In 2024, telecom operators made notable reductions in their spending on both wireless and wireline investments, reflecting a broader trend within the industry.

Key Findings from the Report

According to Dell'Oro Group, worldwide telecom capex fell by 8% in 2024 as operators continued to navigate the aftermath of extensive fiber and 5G infrastructure builds. This decline poses challenges for telecom equipment manufacturers, who also saw revenues decrease by 11% during the same period.

Stefan Pongratz, Vice President of RAN and Telecom Capex research at Dell'Oro Group, notes that the relationship between carrier revenues, capex, and telecom equipment has remained relatively stable, despite these dips in investment. He explains, "With some of the larger fiber and 5G builds now past, differing risk profiles among carriers are more apparent. While growth-oriented operators see elevated capital intensity as crucial for competitive advantages, many others focus on efficiency improvements due to perceived risks."

Outlook for 2025 and Beyond

As we look ahead, the investment landscape is expected to stabilize somewhat in 2025, although it will still prove challenging from both a capex and telecom equipment revenue standpoint. The near-term outlook remains pessimistic, with carrier capex expected to experience a 2% CAGR decline over the next few years.

Carrier revenues are forecasted to advance slightly, at 1% CAGR, leading to a projected capex-to-revenue ratio of approx. 14% by 2027, a decrease from 16% in 2024. Notably, estimated wireless capital intensity is expected to reach 12 to 13% in 2027, which marks a drop of five to six percentage points compared to the peak seen during the transition to 5G technology.

Understanding the Impact of Investment Trends

The report offers comprehensive coverage of over 50 telecom operators across various regions, including the United States, Canada, China, India, Japan, and South Korea. It details carrier revenues, capital expenditures, and capital intensity trends. Such insights are essential as they help stakeholders navigate the complexities of the market and make informed decisions regarding future investments.

Conclusion

In summary, the findings from Dell'Oro Group underline the current challenges facing telecom operators, which must balance the need for investment in new technologies with the realities of a contracting market. The potential downturn poses risks and opportunities, indicating a shift in strategy aimed at enhancing operational efficiency and preparing for future technological transitions. For further details on this report and how to obtain it, interested parties can contact Dell'Oro Group directly.

About Dell'Oro Group

Dell'Oro Group specializes in market research and provides in-depth quantitative and qualitative data to facilitate informed business decisions in the telecommunications sector. With a reputation for accuracy and reliability, the firm serves as a trusted resource for industry insights and strategic analysis.